Politics

4:08 am

Sat February 4, 2012

'Buffett Rule' Becomes A Bill, And Congress Bickers

Sen. Sheldon Whitehouse, a Rhode Island Democrat, introduced legislation this week that would effectively raise taxes for most who earn more than $1 million annually.

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At last week's State of the Union address, the secretary of billionaire investor Warren Buffett was seated prominently with first lady Michelle Obama.

President Obama invited Debbie Bosanek to a seat in the spotlight to underscore a complaint her boss has widely made: that she pays a much higher tax rate than the 17 percent Buffett himself pays.

Speaking to a joint session of Congress, Obama proposed what he called the "Buffett Rule": Anyone making more than $1 million a year should pay no less than 30 percent in taxes.

"You can call this class warfare all you want. But asking a billionaire to pay at least as much as his secretary in taxes? Most Americans would call that common sense," Obama said.

Sen. Mike Johanns, R-Neb., said Obama was simply trying to score political points in an election year.

"When he picks out one item — rich vs. poor — that's class warfare," said Johanns. "And I know he says, 'Well, you can call it what you want.' But the truth of the matter, he knows what he's doing."

New Legislation

This week, Obama's Buffett Rule took the form of a bill introduced on the Senate floor.

"I rise today to introduce legislation that would address some loopholes in the tax codes, which provide for super high-income Americans ways to pay lower tax rates than are paid by regular, hard-working, middle-class families," said Sen. Sheldon Whitehouse, D-R.I.

The bill is aimed at the wealthiest of all taxpayers — the highest-earning one-tenth of 1 percent of Americans. It would affect roughly 100,000 taxpayers nationwide who — like Berkshire Hathaway CEO Buffett, and GOP presidential candidate Mitt Romney — earn more than $1 million a year, but pay less than 30 percent in taxes.

"To call our tax system fair, I believe the highest-income Americans should pay a higher rate, not a lower one, than middle-income taxpayers," said Whitehouse.

Tax rates for all Americans are in fact lower than they were 30 years ago. But tax expert Roberton Williams of the Urban Institute says rates have fallen the farthest for the top-income earners.

"Our top tax rate now is just 35 percent," said Williams. "Twelve years ago, it was 39.6 percent. If you go back into the 1960s, it was 70 percent. In the 1950s, it was 90 percent. ...We have a much lower tax rate now than we had before. Raising the tax rate on high-income people would not be out of line historically."

Debating What's A Fair Share

Tax cuts for income and for capital gains and dividends were pushed through Congress by President George W. Bush.

Douglas Holtz-Eakin, a top economic adviser to Bush who now runs the American Action Forum, a GOP think tank, insisted the wealthy are paying their fair share.

"They are paying for national defense, infrastructure, basic research, education. And when you have a small group providing all of the government to the rest of America, it strikes me as exceedingly weird to say, 'Pony up,' " Holtz-Eakin said. "They've already paid for the whole thing. Why are we asking for more?"

In fact, in 2009, the top 1 percent of tax filers paid about 37 percent of all federal income taxes.

Despite GOP opposition, Whitehouse thinks he may pick up more support in the Senate. He points out that the Bush tax cuts are set to expire at the end of this year.

"So, if the Republicans want to avoid [an expiration of the Bush tax cuts], then they're going to have to agree to some things that they may not otherwise like," said Whitehouse.

But Sen. Claire McCaskill, D-Mo., has doubts about getting the Buffett Rule bill through Congress, noting that Senate Republicans closed ranks late last year to block a relatively small tax hike on millionaires.

"We can't even get them to allow us to raise the rate 3 percent on folks on their second million dollars of income. The Republicans are unwilling to even consider that. So I think the voters are going to have to weigh in here," said McCaskill.